PEEPLES v. HASENMILLER

The opinion of the court was delivered by: JOAN GOTTSCHALL, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs Linda Peeples and Roselyn Armour have sued the law
firm of Blatt, Hasenmiller, Leibsker & Moore (the "Blatt Firm")
and its controlling partners, alleging that the Blatt Firm's
communications to plaintiffs regarding the repossession and
redemption of plaintiffs' merchandise violated the Fair Debt
Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692e, 1692f.
Before the court are the parties' cross-motions for summary
judgment. For the reasons stated below, plaintiffs' motion for
summary judgment is denied and defendants' motion for summary
judgment is granted.

Peeples and Armour separately purchased merchandise from Sears
using their Sears credit cards. On February 24, 1999, Peeples
purchased a washer for $359.99 and a dryer for $239.99. Armour
purchased a VCR in March of 1999 for $88.49 and purchased an air
conditioner in June of 1999 for $208.99. Sears retained a
purchase money security interest ("PMSI") in the merchandise. Before plaintiffs paid for their purchases, plaintiffs each
declared Chapter 7 bankruptcy. After the bankruptcy court entered
discharge orders, plaintiffs were no longer personally liable for
their unpaid debt to Sears. However, Sears' security interest
survived bankruptcy and, therefore, Sears had the right to
repossess the merchandise if it desired. It is undisputed that
both plaintiffs understood that their debt to Sears was
discharged in their respective bankruptcies and that, therefore,
they no longer owed Sears any money. Plaintiffs also understood
that Sears had the right to get the merchandise back.

After plaintiffs entered bankruptcy, Sears retained the Blatt
Firm to request the return of the secured merchandise and, if
necessary, to commence replevin proceedings to ensure the return
of the goods. The Blatt Firm had represented Sears in bankruptcy
and collection matters since the 1980's. The Blatt Firm started
the process by sending virtually identical letters to Peeples and
Armour, stating:

Please be advised that this firm represents the above
named creditor with respect to the account referenced
above. Our client has requested our assistance to
recover the security on the account.

We have confirmed that you have been discharged in
the above Chapter 7 case, thereby discharging the
debt that was due our client. However, our client
claims a purchase money security interest in certain
merchandise purchased on this account, and that
security interest is not extinguished by your
discharge in the bankruptcy. The secured merchandise
on this account is the following:

[DESCRIPTION OF SECURED MERCHANDISE]

Sears has made prior demand(s) for the return of
these goods without success. This is the final demand
for the return of this merchandise. Please call me at
800-850-1079 and press 9344 when asked by the
auto-attendant for the extension number. Please
contact us at your earliest opportunity.

Redemption of Peeples's Merchandise

After reading the letter, Peeples understood that the Blatt
Firm sought the return of the washer and dryer but she did not
call the phone number on the letter to arrange for the
merchandise's return. Consequently, on August 8, 2000, the Blatt
Firm filed a Complaint in Replevin against Peeples. Peeples appeared in court on September 5, 2000 where she
informed attorneys from the Blatt Firm that she was willing to
pay to keep her washer and dryer. Consequently, the Blatt Firm
provided Peeples with a Redemption Agreement dated September 5,
2000 which states in relevant part that:

I, Linda Peeples, hereby elect to redeem the personal
property listed below from the purchase money
security interest(s) held by Sears Roebuck & Co. or
one or more of its affiliates ("Sears"). Sears and I
have agreed that the amount set forth below
represents the value of the property and that the
redemption payment shall equal that value. I
understand that if I had disagreed with this
valuation, but still wished to redeem, I could have
sought a court order regarding value. The property in
possession is in good condition.

. . . I understand that I no longer owe Sears any
money due to my recent discharge under federal
bankruptcy laws. I understand that this agreement
imposes no personal liability on me for the
redemption amount, Sears' only recourse will be
against the property.

Sears informed the Blatt Firm that the washer was worth $277.19
and the dryer was worth $184.79. Based on Sears' valuation, the
Redemption Agreement required Peeples to make a lump sum
redemption payment of $461.98 (roughly 23% less than she
originally paid over 18 months earlier). Defendants had no input
in Sears' valuation decision, did not know what Sears' valuation
process entailed and did not conduct an independent analysis of
the value of the secured merchandise.

Sears' valuation methods were, to say the least, of
inconsistent quality. Sears determined the value of the secured
goods using a valuation and depreciation table it developed with
the accounting firm of Deloitte and Touche. Those depreciation
tables were derived in part from the Orion Blue Books which list
retail values for various products. However, where the Blue Book
did not contain sufficient data, Deloitte and Touche collected
data from other  allegedly less reliable  sources. Plaintiffs
allege that Sears' valuation method was defective because, inter
alia, (1) Sears did not appraise each secured item to determine
its value, (2) Sears' valuation tables did not account for the
condition of the goods and (3) Sears' valuation tables were
organized by product category without distinguishing between
different products within the same category. Plaintiffs allege
that Sears' valuation tables unreasonably inflated the fair market value of
the merchandise, thereby pumping up the value of Sears' security
interest. Plaintiffs point out that the District Court in In re
Melendez, 235 B.R. 173, 184 (D. Mass. 1999)  an unrelated case
 found that, for some categories of goods, Sears' valuation
techniques were "invalid."*fn2 Although plaintiffs attack
Sears' valuation methods as "bogus," plaintiffs make no
allegations regarding the true fair market value of the items at
issue in this case.

Peeples executed the Redemption Agreement on September 5, 2000.
However, she did not make the payment required by that Agreement
and Sears repossessed Peeples's washer and dryer.

Redemption of Armour's Merchandise

After receiving the initial letter from the Blatt Firm, Armour
informed the Blatt Firm that she wanted to keep her air
conditioner and VCR. Consequently, on October 6, 2000, the Blatt
Firm sent Armour a redemption form substantially identical to the
form sent to Peeples. In a cover letter, the Blatt Firm informed
Armour that she could redeem her merchandise for a lump sum
payment of $187.40. Armour did not respond to the redemption
offer and, therefore, on November 28, 2000, the Blatt Firm filed
a Complaint in Replevin against Armour seeking the return of the
merchandise.

Armour attended a court hearing on January 9, 2001 and informed
attorneys from the Blatt Firm that she was willing to pay to keep
the VCR and air conditioner. On January 12, 2002, Armour signed a
Redemption Agreement in the same form as the agreement entered
into by Peeples. The Agreement valued the VCR at $35.05 (roughly
60% less than the original purchase price) and the air
conditioner at $152.35. (About 27% less than the purchase price).
Again, that value was determined by Sears based on its valuation and depreciation
tables. The Blatt Firm played no role in valuing Armour's
merchandise. Unlike Peeples, Armour redeemed her merchandise from
Sears' security interest: she sent a check to the Blatt Firm for
the full amount and the Blatt Firm forwarded the check to Sears.

ANALYSIS

Summary judgment is appropriate "if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a
judgment as a matter of law." Fed.R.Civ.P. 56(c). When
considering a motion for summary judgment, the court must view
the record and any inferences to be drawn from it in the light
most favorable to the party opposing summary judgment. See
Griffin v. Thomas, 929 F.2d 1210, 1212 (7th Cir. 1991). The
party opposing summary judgment may not rest upon the pleadings,
but "must set forth specific facts showing that there is a
genuine issue for trial." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). There is no genuine issue for trial unless
there is "sufficient evidence favoring the non-moving party for a
jury to return a verdict for that party." Id.

To prove their claim, plaintiffs must prove that defendants'
representations regarding the value of the secured merchandise
were false. However, while plaintiffs allege that Sears'
valuation methodology was flawed for various reasons, they have
not pointed to any evidence reflecting that Sears' methods
overvalued goods such as those in this case and have not provided
the court with any information regarding the actual value of the
secured merchandise. Plaintiffs' expert criticizes Sears'
depreciation tables but provides no analysis of how the goods
should be valued under the proper methodology. In other words,
plaintiffs have not pointed to any evidence that Sears' valuation
of plaintiffs' merchandise does not reasonably approximate the
fair value of those goods.*fn4

Moreover, even if the Blatt Firm's representations regarding
the value of the secured goods were "false," the undisputed
evidence establishes as a matter of law that the Blatt Firm
cannot be held liable under the FDCPA for that error. The FDCPA
absolves debt collectors of civil liability if their violation of
the FDCPA was the result of a bona fide error. To establish a
bona fide error defense, defendants must prove that (1)
defendants' violation of the FDCPA was unintentional and (2)
defendants instituted procedures reasonably adapted to avoid the
violation. 15 U.S.C. § 1692k(c).

The only alleged FDCPA violation in this case is that the
stated value of the merchandise was incorrect. However, the
undisputed facts establish that any FDCPA violation by the Blatt
Firm resulting from Sears' valuation process was unintentional. The
undisputed facts reflect that the Blatt Firm had nothing to do
with Sears' valuation of plaintiffs' merchandise. It simply
received the redemption values from Sears and included those
values in the Redemption Agreements. Plaintiffs have not pointed
to any evidence that the Blatt Firm knew what Sears' valuation
method was, let alone understood that there were problems with
that method.

Plaintiffs argue that  regardless of whether the Blatt Firm's
alleged error was unintentional  defendants cannot avail
themselves of a bona fide error defense because they did not
have procedures in place to ensure that the redemption value of
the goods was accurate. In essence, plaintiffs argue that the
Blatt Firm was obligated to conduct its own investigation into
each valuation performed by Sears. However, plaintiffs fail to
cite any authority demonstrating that such a duty exists. To the
contrary, the Seventh Circuit has held that debt collectors do
not have an independent duty to double-check whether their
creditor-clients' claimed debt is legally viable. See Jenkins v.
Heintz, 124 F.3d 824, 833 (7th Cir. 1997). There are any
number of FDCPA errors that reasonable collection attorneys
should actively seek to avoid by creating procedural safeguards.
However, the court does not believe that Congress intended to
require collection attorneys to create entire departments
dedicated to independently investigating their clients' valuation
of a debt. The undisputed facts reflect that the Blatt Firm had
reasonable procedures in place to ensure that the redemption
process complied with the FDCPA. The fact that the Blatt Firm
took Sears' valuation of the merchandise at face value does not
prevent the Blatt Firm from availing itself of the bona fide
error defense.

Because the undisputed facts demonstrate as a matter of law
that any FDCPA violation by the Blatt Firm relating to the
valuation of plaintiffs' merchandise was the result of a bona
fide error, defendants may not be held liable under the FDCPA
and are, therefore, entitled to summary judgment on plaintiffs'
claims. CONCLUSION

For the foregoing reasons, plaintiffs' motion for summary
judgment is denied and defendants' motion for summary judgment is
granted.

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